Many billions of dollars escape under the cover of holidays
After three years of covid-19 restrictions, this wanderlust is understandable. But alongside the obvious motives—sun, sea, sand and study—is another unstated one: spiriting money out of the country. Capital controls limit the foreign currency Chinese citizens can buy. The movement of people across borders creates cover for the movement of money. In 2017, for example, China’s authorities reported how an individual from Tianjin got hold of 39 bank cards and withdrew more than C$2.
A paper published in 2017 by Anna Wong, then at America’s Federal Reserve, tried to calculate how much money was leaking out of China by this route. She examined a variety of sources in 20 popular destinations, including their balance of payments, their tallies of visitor numbers and surveys of how much a typical Chinese visitor spends.
As China reopens, chances for circumventing capital controls will increase. The country’s currency is stable and growth this year looks likely to be strong, but Chinese households accumulated a large stash of deposits in the pandemic. The property market, historically a favoured destination for the country’s wealth, remains moribund. Thus many will be keen to diversify their assets. Most people travel to broaden their horizons. The Chinese also like to broaden their portfolios.
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